I made mine with all of the exhibits on the water, with the fences one square away from or next to the "cliff face", and the paths right on the edge. Only buildings, flowers, etc went on the islands. Low fencing is fine, and can go either on top or bottom. Zookeepers don't have a problem with cliffs. I'm beginning to make more zoos without using fountains & flowerbeds, and am getting a guest happiness from 93 to 98 in most cases. It's the animals they want to see.
I've recently completed the Avian Zoo that couldn't use restaurants and not even the fancy buildings - so a number of trash cans were needed and I kept them happy at 98. Well, each trash can was semi-surrounded by 3 spiral topiaries - may have helped a little.
Check out Iriri's Island zoo in the User's Zoo download section on this site. 1 carrousel, 1 theater, 3 restaurants no other buildings - few flower beds, 1 fountian, used dirt paths, etc. and the happiness level is upper 90's.